Hyliion Looks Perfect for a Bullish Trade Going Into July

Hyliion (NYSE:HYLN) is one of the multitude of electric vehicle (EV) special purpose acquisition companies (SPACs) that came public over the past year. However, HYLN stock stands out from most of its peers in one big way.

A 3D rendering of a green truck in front of a blue sky.
Source: Shutterstock

Hyliion isn’t trying to design its own EV from scratch and ramp up production and marketing that way. Rather, the company wants to help transform the existing trucking fleet from gasoline-fueled vehicles to ones that use a greener and cleaner alternative fuel.

How can it do this? Instead of reinventing the wheel, Hyliion hopes to achieve this by modifying existing trucks. This is a much cheaper and easier-to-deploy solution in the short-term. At least, that’s the company’s aim.

HYLN Stock: The Hypertruck ERX

Hyliion has a clever way around the clean trucking problem. It will take many years to get the logistics industry to buy totally renewable trucks. After all, billions of dollars have already been sunk into the existing trucking fleet. You can’t just flip a switch and make all trucks battery-operated by tomorrow.

The Hypertruck ERX, by contrast, can essentially retrofit existing trucks. The unit comes with both battery and an on-board natural gas generator. This allows the vehicle to get off dirty diesel entirely. To some extent, as conditions permit, the truck can go with the electric system. And when that is exhausted? It can switch to natural gas to keep its range up.

Natural gas isn’t totally renewable of course, but it’s far cleaner than petroleum. In this way, Hyliion’s solution sharply reduces emissions while avoiding the cost and other problems associated with 100% battery-based set-ups.

Plus, this idea has another big advantage: the company doesn’t have to worry about designing an entire truck. As Tesla’s (NASDAQ:TSLA) Elon Musk has learned, manufacturing is difficult. So, HYLN is prioritizing getting just one key piece of the vehicle perfect and letting the existing industry handle the rest. This seems much more feasible than some of the other EV makers’ plans. That bodes well for HYLN stock.

The Set-Up Favors Bullish Traders

A big question for electric vehicle stocks right now is if they have enough cash. Many EV companies don’t intend to reach significant production or revenues, let alone profits, for at least a few years. So, the priority is having the runway to get to the stage where things can ramp up.

Hyliion is in great shape on this front. As of the most recent quarter, it had $483 million in cash and short-term investments. It also did not have a huge loss from operations, so it has a ton of time and resources to make its business model work.

Meanwhile, Hyliion faces huge short interest, currently at 19% of the float. This practically begs for traders to look at it as a short-squeeze target. It makes little sense why anyone would stay short HYLN stock at this point. Particularly with the company having such a huge cash position, HYLN’s market capitalization of $1.95 billion seems like it could increase quite a bit.

There’s also another near-term catalyst here: Hyliion recently joined the Russell 3000 and Russell 2000 indexes. This makes HYLN stock a member of several key indexes and in turn will attract substantial passive investor money. Stocks often rally heading into and just after joining a major stock index.

HYLN Stock Verdict

I really like what Hyliion is trying to achieve. There should be a significant role in the market for a bridge between fossil fuels and renewable energies. A lot of companies aren’t going to be willing to leap straight from traditional internal-combustion engines to all-in green alternatives. So, HYLN could do very well for itself serving as the interim solution.

Of course, critics can rightly point out that Hyliion hasn’t proven much yet. That’s totally fair. However, few of the new generation of EV companies have established much commercial success so far. It comes with the territory at this point; EV stocks require some faith in the concept for investors to buy in.

That said, Hyliion’s idea seems sound and should appeal to a wide market. So, if you’re fishing through beaten-up EV stocks, HYLN stock looks pretty interesting. It would be hard to have too much confidence in Hyliion until it generates substantial commercial revenues, but as a speculative gamble it looks ready to roar.

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On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. 


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